U.S. Banks Are Doing Okay, Made $34.5 Billion Profit Last Quarter

While the big banks plead hardship and whine about having their profits eroded by regulatory reform, they fail to mention that the American banking industry appears to be doing okay, with 12 straight quarters of year-over-year growth and $34.5 billion in profit in the second quarter of 2012 alone.

According to the Federal Deposit Insurance Corp., that profit is an increase of almost 21% from the second quarter of 2011. It’s also right in line with the $35.3 billion profit earned in the first quarter.

“The banking industry continued to make gradual but steady progress toward recovery in the second quarter,” said FDIC Acting Chairman Martin J. Gruenberg.

Other positive trends:

* Only 15 FDIC-insured banks failed in the latest quarter. This is the fewest failures since the fourth quarter of 2008.

* Fewer banks are in danger of failing, as the number of “problem institutions” dropped from 772 to 732 in the first quarter, marking the fifth-straight quarterly decline.

Part of the reason for the brighter outlook is that banks are putting aside less cash to cover loan losses, as regulators put pressures on banks to adjust underwater loans. These adjustments often result in smaller losses than foreclosures.

Banks are also lending slightly more, with a 1.4% year-over-year increase in loan balances. The first quarter of 2012 was the only one in the last five quarters where loan balances decreased.

“This quarter’s return to loan growth is an encouraging development, but we will have to wait and see if the trend toward increased lending can be sustained,” Gruenberg said.

U.S. banks made $34.5-billion profit in second quarter [L.A. Times]

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  1. Lyn Torden says:

    Is this that “private sector” the president was talking about?

  2. areaman says:

    I wonder how much of the profits are from taking depositing and lending, and how much of the profits are from fees.

    • MrMongerty says:

      Generally? Banks are going to be making a considerable amount MORE from fees than most people suspect. If you don’t use your debit card a ton, and don’t get any fees for OD/ other services, then you are losing $$ for the bank (last I checked it was more than $100 per year for a bank to service an average account).

  3. Coffee says:

    I’m curious about how much of this profit is derived from taking zero-interest loans from the government, then earmarking that money for loans (with interest) back to the government.

    • Blueskylaw says:

      The Federal Reserve Bank loaned funds to major Wall Street banks at rates of between 0.10 percent and 0.25 percent and at the same time banks were encouraged to purchase U.S. Treasury bills. Two-year Treasury bills the federal government was selling were fetching more than one percent interest. The deal β€” borrowing at a discounted rate from one agency of the federal government and taking loans earning interest at a higher rate from another agency of government β€” amounted to a cash transfer from the federal government to the big banks that Bloomberg estimated netted the banks some $13 billion in profit.

      http://themoderatevoice.com/130732/secret-federal-reserve-loans-of-7-8-trillion-yield-13-billion-to-banks/

      • Coffee says:

        Thank you! I knew that is accounted for a large percentage of the profits involved. I with that I could take a loan from a bank at 1% interest and use that money to buy a CD that returns at 5%…

      • ChuckECheese says:

        This sounds bubbleponzipyramid-ish.

        • Coffee says:

          It’s basically a license for the banks to print money at taxpayer expense. Wouldn’t you love it if, as a consumer, you had $10,000 and you could do the following (the interest is simplified for this example):

          Borrow $2,000,000 at .25% interest for two years…over that time, the interests would cost you your $10,000…

          …and then invest the $2,000,000 in a bill that returns 1.5%, yielding $60,000 of interest, a $50,000 (or 250% annual) return?

          Yeah…the banks do that, and the profit is derived directly from taxpayer money.

  4. edrooney says:

    Good for them. Way to go! You reap what you sow….eventually.

  5. ChuckECheese says:

    The pic made me remember … Every “holiday” season, somebody puts out these little plastic piggy banks filled with Hanukkah gelt. One year I could get them at Walmart, but ever since, I only find them at Cost Plus. A friend requires me to mail her a few to her home in Israel each year, because she gets a kick out of explaining piggy banks, chocolate coins and America’s Christmas-Hanukkah stand-off to non-American Jews.

  6. axhandler1 says:

    Oh thank god. I’m always concerned that the banks are going to make enough money this quarter. Glad I can finally stop holding my breath.

  7. Shorebreak says:

    Ben Bernanke’s Federal Reserve’s zero interest rate policy (ZIRP), together with QE1,2 and shortly arriving QE3, is designed to enrich the too big to fail (TBTF) Wall Street banks while at the same time punishing prudent savers and those seniors on fixed incomes. Ben is indeed doing an excellent job for his circle of friends, as the profit figures show.

  8. dolemite says:

    I was really concerned profits would be low. Now that the job creators are rolling in the money, they can start with the job creation, or are taxes still too high?

  9. dush says:

    Money printed at the FED and loaned to the banks at almost 0%.
    Fractional reserve system multiplies the money out of thin air.
    Banks deposit that money back with the FED at several % interest.
    Profit!

  10. Press1forDialTone says:

    Reminder 1,3472: Switch all your banking to a credit union NOW.
    Instead of investors owning the “bank”, YOU own the bank along with
    the other members.

  11. Extended-Warranty says:

    Oh how everyone loves to attack banks.

    Apple made 8.8 billion last quarter. Compare that to 34 billion that over 7000 banks total took in.

    • JJFIII says:

      That was $34 BILLION for the quarter, not the year. i also would say, Apple gives a better product. Most of us are FORCED to deal with some form of financial institution. I was forced to deal with Chase because my mortgage was sold. I have a choice to never give one penny to Apple ( I have never bought an Apple product). I was never asked how I felt about Chase making money off me.

      • Extended-Warranty says:

        No one forced you to have a mortgage.

        But do tell. How many hardships did you endure by having a new mortgage company?

    • MarkFL says:

      Yes, but Apple did not:

      A) Ask taxpayers to bail them out while paying billions in bonuses to its executives,

      B) enrich themselves at taxpayer expense via the Fed loans described earlier in the comments,

      C) throw people out of their homes because of their own incompetence, or

      D) impose ridiculously high fees for conducting normal business with them.

      (FYI, I have never owned a Mac.)

  12. Proselytic says:

    I’m sorry, but in this instance, Authors should not write about what they clearly do not understand, nor should it be parroted. Banks are still being subsidized with YOUR money, through ‘TARP daughter programs’. Banks are still carrying high hidden debt and the worst is, nothing has changed. Blaming it on regulation is a marketing tool bank lobbyists use and spread. The world’s economy is a terminal patient, waiting for the body to expire and no, I don’t feel sorry for the patient whatsoever. What I do feel sorry for is the American people, who still have no clue and suffering every day because of what the not so free market is doing to them.

  13. zegron says:

    Is that gross or new profit Chris? It makes a tad bit of difference…